Collections during COVID-19: lessons learnt and what the future holds

Although lockdown restrictions have begun to ease and for some this means a return to the workplace, many credit professionals are still working remotely. It is easy to understand how a feeling of isolation and disconnect could set in, with credit managers naturally wondering how their collections strategy and performance compares with other firms.

Our B2B debt recovery team will share insights and findings from our own national client base, which consists of a number of major brands across several sectors.

What was the initial response of credit managers when lockdown was introduced?

At the start of lockdown, many senior credit professionals were clearly feeling uncertain about the best way to manage collections during so much uncertainty and media-driven hysteria. Largely working out of make-shift home offices, they were keen to understand what our other clients were doing strategically, and Flint Bishop was endeavouring to share best practice wherever possible to help navigate the unchartered waters. 

Organisations like the CICM helped to keep a sense of normality and a sense of ‘community’ within the world of credit with weekly Zoom calls to share experiences and best practice. This sense of people pulling together has been very well received during a tough time of remote working.

We found that our clients’ attitudes to collections and debt recovery during lockdown were incredibly varied. For the majority (67%) of our clients, you may be surprised to find that the debt recovery strategy employed was very much ‘business as usual’ with no strategic changes being made to pre-legal recoveries or even the issuing of court claims.

For the remaining 33%, there was a significant focus on internal credit control, with several clients putting a temporary stop on third-party debt recovery whilst operational, ethical and reputational considerations were assessed. One particularly large business utilities provider took the decision to temporarily pause both the external debt recovery work that Flint Bishop service, as well as their own internal collections process for the entire duration of lockdown!

A couriers and logistics sector giant looked at shortening their payment terms in line with those that were specified in their terms and conditions, as opposed to those being adhered to in practice.  Ironically, in the last few months, this client has also seen the largest amount recoveries to date. In April alone, there was a 217% increase on the March recovery figure. This was largely due to a significant increase in online sales during lockdown, where small business debtors were somewhat dependent upon couriers to stay trading. This allowed Flint Bishop to follow more of a ‘business as usual’ debt recovery process than we had done previously in March when caution was exercised as a result of the initial COVID-19 uncertainty. 

Aside from such ‘business-critical’ products and service industries, most other credit managers we deal with have had to be considerably more flexible with debt settlements and instalment plans than they were previously. As an extreme example, debt recovery payment plans for a B2B energy supply giant increased by 300% during the lockdown period. 

How have employees being furloughed affected the way in which credit and collections teams have been able to operate?

The vast majority of our clients managed to retain their staff and didn’t use the furlough scheme for credit control employees. However, the challenges of setting up and monitoring home working have undoubtedly led to delays with both internal collections and preparing placement files for external debt recovery referrals. For example, one energy client had to swiftly source several thousand laptops at short notice before they could even enable their staff to work from home.

Another client who is a multi-branch building supplies firm was unable to send their final dunning letters as there were no staff in the office to be able to print them. This obviously delayed external debt referrals somewhat. Clients in this position tended to use the time as constructively as possible by conducting general housekeeping duties such as cleansing data ready to commence recoveries when they were able to do so. 

What impact has lockdown had on the debt recovery performance?

The impact on recovery results has varied significantly from sector to sector and from company to company. We have seen a noticeable decline in recoveries within the building industry as many debtors have not been able to trade in order to pay off their debts. Some of our clients in this sector have seen as much as a 70% decrease in their recoveries.

In comparison, companies within the business supply industry have largely seen an increase during or coming out of lockdown as their debtors (who were still trading) were dependent upon their products and services to survive. One client in this industry saw a 47% increase in recoveries between April to May and then a further 53% increase from May to June.

Similarly, the business utilities sector saw continued levels of recoveries with the work we do on ‘live’ accounts. This was due to the nature of ongoing supply, where leverage could be used for businesses who wished to keep trading during lockdown or resume trading coming out of lockdown. However, ceased/disconnected utilities debts did decrease, which is to be expected as the leverage of continued supply is not the same.  The most extreme drop in recoveries was 33% over two months.

What different approaches to debt recovery have been implemented to help combat the effect of COVID-19?

In the early stages of lockdown, we spent time discussing and suggesting amendments to the usual way in which we recover the debts for each client. During a period of such uncertainty, it was important for creditors and their debt recovery partners to work in cooperation. Maintaining cash flow was critical to our clients’ survival, but there were also ethical considerations around collections and the reality that many of their SME debtors had been forced to temporarily close under government guidelines rendering them unable to pay and, in many cases, uncontactable. One of the first and most sensible changes implemented was that clients who would normally add additional charges to their principal debt balance have temporarily suspended them. 

Within business utilities, many of our clients agreed payment holidays for three months on the understanding that the accounts would be immediately referred to Flint Bishop for debt recovery action if payment is not made following that holiday period. During lockdown, utilities clients were not able to disconnect any businesses with live supply accounts, which is ordinarily a key threat used to encourage prompt payment of overdue invoices. 

As government measures such as the furlough scheme were introduced, it became apparent that many small business debtors had adopted the view that they had no accountability for any debts during lockdown. There was a misconception (often purposeful) that all overdue payments throughout the whole country had been ‘put on hold’ for a few months, or in extreme cases were perceived never to have to be repaid. So, where we were able to make contact with debtors, a crucial part of maintaining successful recoveries was to ensure that there was accountability for the debts, even if there were no immediate means to pay. 

We noticed a significant trend where clients who have a high propensity of sole trader accounts were taking a slightly softer approach overall. This involved the removal of threatening court action within letters to debtors and taking a more sensitive approach when making collection calls.  Clients were more inclined to offer payment plans where they wouldn’t ordinarily do so. This had a detrimental effect on their collection rate, and for one major insurer client, this change of tack resulted in an overall decrease of 36%.

Segmenting debtor data to ensure appropriate recovery strategies were being applied to different types of accounts was crucial. For example, some clients wished for us to take a harder line with essential businesses during lockdown in the knowledge that they were still able to trade, and COVID-19 could not legitimately be used as a reason given for non-payment.

Debt recovery legal/litigation action

A high propensity of clients across all industries placed a stop on the issuing of court proceedings during lockdown. As the restrictions have eased, this has led to mass issuing of court claims since the end of June which has caused a backlog. This has also skewed debt recovery budgeting for some clients as a mass of court fees have been incurred all at once.

The ability to enforce county court judgments was on hold with the sheriff when the UK went into lockdown but was made available for business premises from 18 May 2020. 

What does the future hold for collections?  

As we start to move out of lockdown, many creditors are feeling the impact of extended payment terms, payment breaks and general leniency. Recovering overdue payments is critical for their own business survival. Much has been written about the need to provide protection for smaller business debtors, but if a large national organisation goes under due to cash flow issues, then the scale of possible redundancies is huge. 

However, debt recovery still needs to strike a balance with appropriate and refined leniency. Many small business debtors still find themselves in rocky waters as trading has re-commenced for most, but things are still far from stabilised. Unfortunately, many B2B debtors quickly spent government grants and as they start to make contributions to their employee furlough schemes, or bring back staff from furlough leave, this has further impacted their cash flow. All available data suggests that there will be an increased number of insolvencies over the coming months. 

We recently spoke to Head of Creditor Markets Team at PwC, Lucy Fulmer, who confirmed:

“PwC is seeing more requests for advice in relation to the Corporate Insolvency and Governance Act 2020 and is gearing up for an increase in insolvencies in Q4 20 and Q1 21.”

Local lockdowns also continue to impact on businesses regionally, which again requires us to geographically segment debt referral data for appropriate treatment within those areas. The ever-changing quarantine rulings continue to have an impact on sole traders who have been or planning to travel abroad.

Amendments to the winding up process to protect debtors for non-payment due to COVID-19 will mean delays in creditors being able to take such action and has rendered stat demands void. However, this does not appear to be widely known as they are still being utilised without any kick-back to date.


Whilst overdue invoices accumulate and home working prevails, it may be more prudent for creditors to shorten their internal collection processes to utilise external partners for debt recovery at an earlier stage. Once the available furlough schemes come to an end in October, the amount of bad debts and possible insolvencies is likely to escalate once again. Ensure that your third-party debt recovery partners have the capacity and capability for additional assistance and swifter debt referrals to them if necessary.

The most recent Insolvency Service statistics on company insolvencies have shown a 50% reduction in June 2020 from the previous year. Although this has increased a little in July 2020, it suggests a lot of businesses are hanging on with government assistance in the immediate term, but we are likely to see a steady increase in insolvencies once those measures fall away. With new insolvency action through the courts largely unavailable in the immediate term, businesses will need to be more careful not to extend too much credit to debtors in difficulty.

Going forwards, it will be a balance between bringing in the money owed to you and ensuring that you have a customer base to work with. We are all in unchartered territory and have had to adapt to the challenges without any experience of similar circumstances, or knowledge of the length or extent of disruption. Hopefully, this insight into our experiences will help you to plot the right path for your business and the policies you choose to implement.

If you would like to arrange a confidential discussion about your debt recovery requirements, please call us on 01332 226 474 or email .